Doximity (DOCS) is facing limited clarity on the execution risks linked to its pivot to artificial intelligence as well as on the near-term trajectory of its revenue and margins, BofA Securities said in a note Monday.

The company is the "industry leader in pharma advertising to physicians" and is also "making the right strategic investments to compete against emerging AI models" like OpenEvidence and OpenAI, according to the note.

However, given that the company's AI peers have "deep pockets" and the top 20 pharma companies already spend significantly with Doximity, there are concerns surrounding Doximity's "ability to grow its current allocations as well as successfully compete for AI dollars," BofA said.

The investment firm also said that since Doximity's earnings before interest, taxes, depreciation, and amortization margin profile is near 50%, investors may be underappreciating the duration and size of the company's future investments.

"While shares are inexpensive, we see downside risk to consensus over the next few years," the firm said.

BofA downgraded Doximity to underperform from buy and cut the company's price target to $20 from $38.

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